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50 Richest Ukrainians

KIEV, Ukraine -- In its annual survey, Korrespondent magazine, the Russian-language sister publication of the Kyiv Post, found that Ukraine’s 50 wealthiest citizens lost 75 percent of their net worth since last year.

A rising tide lifts all boats. And a sinking one lowers them. Such was the case with Ukraine’s 50 richest citizens. Korrespondent magazine, Kyiv Post’s Russian-language sister publication, found in its latest survey that the elite club’s net worth dropped 75 percent since last year.

The fourth-annual rankings by the news magazine, whose special edition hit newsstands on June 12, are closely watched for what the results say about Ukraine’s economy. And this year’s results show wealth evaporated like ice cubes on hot pavement in summer.

This year, Korrespondent found that the top 50 combined are worth only $28.9 billion – roughly $2 billion less than Rinat Akmetov’s wealth in 2008 all by himself. This year, Akhmetov again tops the charts, but with only $9.2 billion to his name. Akhmetov, a steel and mining magnate whose System Capital Management conglomerate has branched out into many other industries, is just the highest-profile victim of the global financial crisis and economic downturn.

“Companies dependent on export markets, specifically in the metals and mining industry, which had led the Ukrainian stock market’s surge in 2007, were the first to suffer when the world economy started to deteriorate in the second half of 2008,” said Victor Luhovyk, research editor at Dragon Capital, the Kyiv-based investment bank that worked in partnership with Korrespondent magazine on the annual evaluations.

The combined market capitalization of domestic metallurgical companies fell by 80 percent in the last year, to $7.9 billion, while the value of mining companies slumped to a 78 percent hit, down to $5 billion. “This is why many of the top 50 with assets in mining and metallurgy saw their worth plummet by 80 to 90 percent over the past year,” Luhovyk said.

Other industries withstood the downturn better. The combined market value of listed agricultural and consumer companies (including agriculture, food processing, retail and a few other sectors) declined by 41 percent. Luhovyk said other companies with assets in agriculture and food processing suffered less, losing between 40 and 70 percent of their value.

But the upshot remains that modernization, infrastructure development and capital-raising efforts have slowed as the Ukrainian economy finds itself in crisis and companies find their survival is at stake. Yuriy Belinsky, Astrum Investment Management’s head of research, said initial public offerings “were postponed and company transparency was one of the victims.”

But with an average net worth of more than $500 million, the top dogs of Ukraine still have money for Mercedes and mansions – or even to invest into their businesses or their employees, if they so choose.

Ukraine’s captains of industry still finance political parties and have commanding influence on decisions made by government on all levels. Unlike in Russia, where the wealthiest have lost their “oligarch” status and have been brought to heel by the Kremlin, the clout wielded by the richest in Ukraine is enormous.

“It is pluralistic and in perpetual competition with one another since no one has a ‘controlling stake.’ They all have ‘blocking stakes’,” said Oleksandr Paskhaver, president of the Center for Economic Development, a think tank in Kyiv.

Astrum’s Belinsky says there are enough competing interests and power centers at the top – for now – to prevent the wealthiest from totally running the state. “If such a balance was to shift in favor of one group or a limited number of groups, then we would risk getting a real, full-fledged ‘captured’ economy in Ukraine,” Belinsky said.

Nevertheless, many believe that the best interests of society are still mainly ignored by the ruling elite in business.

“We have an elite that is separate from citizens. They don’t pay attention to civil society interests. Our politicians pursue, at most, a populist policy,” said Yevhen Bystrytsky, head of the International Renaissance Foundation in Kyiv, a civil society development organization funded by philanthropist George Soros.

Bystrytsky cited the recently failed talks to form a “broad coalition” between Prime Minister Yulia Tymoshenko’s eponymous bloc and the Party of Regions led by ex-Prime Minister Victor Yanukovych. The pair ignored the public and denied people access to information.

“Their coalition talks were undercover. It wasn’t public. Civil society simply accepted their talks as the private interests of the oligarchs,” Bystrytsky said. “They just wanted to freeze the political regime that has been in place since the Orange Revolution.”

But while the same old crowd dominates the new list of the 50 richest, the presence of five newcomers is seen as a welcome sign that wealth is being generated in areas of the economy that were not part of the traditional Soviet heavy-industry structure. However, Luhovyk said, Ukraine’s economy still remains heavily dependent on exports such as steel.

“This is, of course, a positive sign, both in terms of economic diversification and the strength of local demand,” said Luhovyk, referring to such entrepreneurs as Oleksandr Kardakov, who runs a successful information technology company and is worth an estimated $118 million.